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Ro Khanna Education. (2012) 'Entrepreneurial Nation Why Manufacturing Is Still Key to America's Future.'

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China 18, United States 10, America 10, Us 6, Herbert Hoover 4, Pentagon 4, Calvin Coolidge 3, Alexander Hamilton 3, Brazil 3, Ronald Reagan 2, Virginia 2, Richard Macke Gregor 1, Samuelsson 1, Starbucks 1, R. Huizenga 1, Clinton 1, George Mason 1, Hamilton 1, Henry Clay 1, Robert Reich 1,
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  CSPAN    Book TV    Ro Khanna  Education.  (2012) 'Entrepreneurial Nation  
   Why Manufacturing Is Still Key to America's Future.'  

    September 23, 2012
    11:15 - 12:00am EDT  

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quietly and he said i have to do in my time what i have to do and you have to do what you have in your time what you have to do. perhaps when we talk about this great document it sums up the convention they had to do in their time what they had to do, and we have to do in our time what we have to do. >> we have an additional fought and then bring our proceedings to a close. this conversation i think has been in the spirit you're calling for our sponsoring institutions, the federalist society and the constitution
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accountability senator doesn't always agree on everything that i think we do both agree on the idea of a serious conversation centered on this document. >> i don't need many predictions but i would say that most of the amendments as a practical matter had to have the support of both parties because it is hard to get two-thirds and three-quarters without both parties being on board. the great amendments of the 1960's, for cybill, the great iconic statute of the 1950's, the civil rights act of '64 and voting rights act of 65, the fair housing act of 68, republicans and democrats in the spirit that you are calling for coming and one of the things we are talking about is the sponsoring institutions for this extraordinary conversation, and
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that as the national archives. i think that the framers of the constitution who were attending their regime studied what has gone before. they studied the state constitution and the salles which ones work and which ones didn't. they put their constitution to a vote so let's put our constitution to a vote. most of the constitution have three branches of government. but still with that. the independent executive works well for massachusetts and new york let's build on that and so on. the bill of rights and george mason, virginia bill of rights. abolition of slavery occurred in various states, and then out of for a lesson, so what has gone before us clacks we have a duty to the future and i think they tried the best when they actually are understanding and
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respect all and that is part of the national archives. if i can just on a personal note tell you why i'm here. and justice thomas's presence is no explanation. what the heck am i doing here? when i was 11-years-old i came to the national archives and i got this document that is a big version of the emancipation proclamation, iain the innovation proclamation look at the 100th anniversary of the 50 years ago september 1962 and released at special edition for the kids like me and i got my picture of abraham lincoln.
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[laughter] that made the not cynical. they come at a very young age to a place like this the exposed to mr. langdon been exposed to the declaration of the independent constitution and i think i'm here today honestly because of that and i would like to give special thanks to the national treasury, the national archives, and i want to thank all of you for coming to this extraordinary conversation. i want to encourage those in the television audience to come to this place if you can. bring your kids, bring your grandkids and grandnephew, bring the next generation come and if you cannot come here physically got experience the national archives on line. you mentioned that the internet. if it is up to us, we can't just
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think about the future without thinking very deeply about the past. this is a place that will help us do that thinking and sell thank justice thomas and the archive. [applause] next on book tv, former deputy assistant secretary of commerce argues that the u.s. is and will continue to be a leader in manufacturing and innovation. it's about 45 minutes.
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>> thank you for the kind introduction. it is an honor to be yet politics and prose, such an institution to the city and a pleasure to be here. thank you everyone for coming on an august evening to hear me. i will try to be brief in my comments and i would rather have more of an exchange of ideas and hear your perspective so we can have a conversation about manufacturing and what our country should do to be competitive. the idea from the book came about when i was traveling and around the country, and i would see a successful manufacturer making blunders and steel and full-year suits and meat and food, and i would say i thought that all of our manufacturing
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had gone offshore. something didn't make sense. so i started to wonder what were people missing in the story? and it turns out that while a lot of manufacturing has gone offshore, so if you go into a store, the toys and apparel and all of that we still are a world leader when it comes to complex and advanced manufacturing. we make almost 80% of our steel, a tremendous amount of plaine and we are neck-and-neck in manufacturing with china. that is a staggering statistics. we make 20% of the world's goods with about 10% of our economy and china makes about 20% of the world's goods with 40% of its economy. so, we are neck-and-neck as a manufacturer and it is due to a
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six time productivity a vintage that we enjoy over china when it comes to manufacturing. and we even have a productivity advantage of a country like japan and germany, countries that are thought of as manufacturing leaders. so i wonder that i started asking myself what is it that gives this productivity get into? what gives american manufacturers this ability to complete. i wanted to go and talk to them in the factors because one of the things when you are in washington and in these bureaucracies we had a lot people pontificating about the state of american manufacturing and what we need to do without actually engaging and talking to them and factors and not put together talking to small and medium-sized manufacturers. the large manufacturers, the ceos are represented on policy think tanks, but the legality is that almost half of the
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manufacturing jobs are with small and medium-sized businesses. i decided that i wanted to talk to some of these smaller and medium-sized businesses and figure out what was giving them a comparative advantage. one of the arguments i made in the book is that hour on to the real culture that allows us to have a product to the advantage, and by that i don't mean simply the entrepreneur, the cost of steve jobs or mark's model for the great industrialist. what i mean is that companies that do well when the manufacturing base actually listen to the ideas of their employees, and they are encouraging their employees to come up with officials in productions to find out to assemble things more efficiently or how to make products that are more innovative and soliciting those ideas coming in here is where i think a lot of the
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traditional critique of the manufacturing's misses the march. robert reich makes the argument that there is college work, people like lawyers and doctors and bankers are now which workers and so the company name is the idea. modern manufacturing requires a lot of knowledge. these are people that are innovative and i can tell you a lot of repetitive work so people that somehow lawyers draft documents and standard templates and it is repetitive, the distinction is artificial and the best manufacturers that i met were listening to the ideas. let me give you concrete examples i talk about 15 in the the. one is vitamix when blunders. the blunders that make your
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frappucinos early in the united states. my first learned that i sit now i know why pay $4 for my frappucinos. i said why is it that you are allowed to -- you are able to make blunders in the united states come and sell them to the specialty coffee shops, and she explained that the specialty coffee shops have specified requirements. one, they won't want illinois is they have starbucks and of the blenders are making noise you aren't going to go into the store. so they want to make sure that there is no malaise. second for those of you you know you don't want those ice chips in there so they want to make sure that it's actually crushed
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the ice chips properly. so, what he was able to do is actually work with a specialty coffee shop on the design of the blunder they wanted and that is a difficult process to outsource. if you are in china and brazil figuring out how to design something interesting with them would be very complicated. as of the customization of the products that a lot of the small and medium-size manufacturers build is actually inherently impossible to do in the united states and wasn't just jody engaged in this, it was her employees coming up with that ideas on what to do to make a blunder better. a second example is the global manufacturing. it was one of the most inspiring stories and books, it was
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existing since 1887 and they make fire suits. after 9/11 when the pentagon was attacked, they needed five-year companies to put out the fire. the head different companies come from the virginia and the d.c. area and noticed the company's in the suits were able to work through the night in the deal with the pact engines and extremits that were in the pentagon building so the commanders in the pentagon called robb who was the owner of the globe fire suits and said we need 300 fire suits tomorrow. what size? i don't know just figure out how to get them there so the small company in new hampshire about 300 people assembled of the five-year suits and he was the last the was able to take a mercy slide out of 9/11 and the only one in the air space
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delivered them to the firefighters to put out the fire in the pentagon so the story about the patriotism but it's more than that. i wanted to know what allows the five-year suits to still have these comparative advantage as? and one of the biggest insights and production efficiency. to make them much cheaper than a lot of their competitors and the idea, which i go into detail in the book came from one of the employees on the assembly line who said if you use a small size needle than a larger size you're actually going to make small holes and it's going to save fabricant cost. this was submitted in a suggestion box that led to a lot of the innovation. and again, it shows the sort of culture of listening to the global employees.
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the second part that was unique is the way that they would innervate the type of equipment on the five-year suits that helped fight the extremities didn't come from ph.d. scientists. in fact, the guide was doing that tinkering didn't even have a college degree so often there is a sense of we need this them education. we shouldn't underestimate this sense of practical skills and the generations of people acquire actually doing things on the factory floor that account for the most successful innovation when it comes to fire suits. one of the cases is the space culture and the business world gives us this competitive the advantage over the more author of treen particularly small and medium-sized businesses because it allows us to a, as production
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and to customize the product. tracing the support of manufacturing back in history is the idea that there has always them a role for the government support of the industry when all the way back to alexander hamilton. i tell people you don't have to read the world is flat to understand what we have to do in the globally competitive world. you can read alexander hamilton's report ten pages and he makes the argument. hamilton says in the world where we are competitive with other nations and other nations are setting up the industry's, we need to make sure that we have fair trade and we need to make sure that we are providing incentives, economic incentives for the new industries and we
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can almost get the justification for funding that through the argument. hamilton makes the argument that we need infrastructure and we need the right tax incentives and the right of the work force that is educating. even jefferson. people say jefferson was on the inside but he comes around with the view that we need to support manufacturing. this becomes the american economic system it influences henry clay and abraham lincoln is the governing philosophy of america's rise in industrialization. herbert hoover when i got to the commerce department i wondered why would you name the commerce building after the president responsible for the depression not to betray my partisan leanings?
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but i developed a lot of respect for herbert hoover. herbert hoover may not have been the greatest president but he was a great commerce secretary. they called him the secretary of commerce and the undersecretary of everything else and he was working for calvin coolidge and you know what herbert hoover did? he believed in the american economic system and he and calvin coolidge, the great limited government poured in billions of dollars to separate the aviation industry in wichita kansas and funded the existence of the infrastructure, and calvin coolidge talks about the importance of investment and roads and eisenhower was the highway and ronald reagan invested in the talks we set up the semiconductor industry, and the manufacturing extension partnership which now some people think is irrelevant oracle was the brainchild of ronald reagan will?
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what has happened? the last 30 years there has been the sense that government no longer should matter among some people with certain ideologies and they argue that america shouldn't become a stake of becoming like europe. the irony is of course their philosophy or american thinkers likes high at and if ayn rand. the justification for the free-market absolutism is not found in american history because america, alexander hamilton said he believed in the free market, the practical politicians be to realize that there are times to intervene and we have been a nation when it comes to manufacturing that has rejected the ideology of both the left and the right and has
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done what works and that is through the book i try to advance that argument, and i think the person that sums it up the best is the columnist richard macke gregor from the financial times, and he has a brilliant quote where he says america's problem isn't that it doesn't work like china. america's problem is that no longer works like america. i think what he means by that is we don't need to copy the system of government in china or brazil that has access of the intervention that we do need to remember what policies help make us a great industrial power, and those policies can be adopted on a bipartisan basis like they were until the most recent history, so what i would say this free-market absolutism so
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there's a practical middle ground. the question then we can get into some of the policy, the question that often comes up this what is the hope for the future? what is the sense of american manufacturing and american economy with the rise of china and the rise of brazil and other developing nations? one of the points i make is the nation as been consistently underestimated when it comes to our economy. in the 1950's, larry summers knew this point in the article had many people are familiar with samuelsson? he wrote a textbook where he argued that if the growth rates continue as they were the soviet
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union will undertake the united states by 1985 push and won the nobel prize in the that turned out to be incorrect. then cover article after cover article in the harvard business review predicted that america wins the cold war, the japan and germany are going to be the post war economy. those predictions seem rather silly in retrospect. but it is nice to diminish the contributions of the skeptics because the greatness of the nation as that at times of crisis, in the times when things may not be on track it is suspected the -- the skeptics that allow our policy to adopt
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and continue to lead. the same principle was true right now. the small and medium-sized manufacturers are doing extraordinarily innovative things and customizing products and economizing on the production. they are out there competing. we are neck-and-neck with china but the growth rates are not promising. china is growing at six or 7% and we are growing at about 1%. the last nation to have lost in manufacturing can anyone guess who that was? great britain. things didn't work out well for them afterwards. we are faced with a challenge, and the challenge is not our the american entrepreneur is up for it, the challenge is are they going to get on a bipartisan basis the support of their government that has existed for the 200 year tradition, and the
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argument i make is we need to come together as a nation on the national security basis and on a sense of our economic competitiveness to put together the agenda that is going to help the small and medium-sized and the factors make ends meet and continue to thrive in an environment where they are not getting the assistance of their government, and other competitors are getting extraordinary assistance from their government. let me end on the note i am the most optimistic about and i don't talk about this foley but coming from silicon valley, you see the existence of the technology companies and the technology advantage is still the case that river and facebook have emerged in the united states, and what they represent, and i think the technology future of the united states represents is the ability to not
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just export our products and technologies that export our ideals of the space dialogue and the free flow of information, and the ability of the technology companies which are still based in the united states to have a global impact i think bodes well not just for the economic future but also for the ability of america to continue to project its ideas across the world to flee democratize the inflation which ultimately why are doing is fundamental to the productivity and comparative advantage think you and with that i would be happy to answer your questions. >> i wanted to ask you a little bit about what you foresee in
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manufacturing as manufacturing itself changes. ipad understand there may be less assembly lines and more widespread with computer-aided manufacturing. and how well the advances persevere in that environment. thank you. >> that is an interesting question. what will the role of technology be for the american manufacturing? the first thing i caution people about is i do not think technology is going to replace workers. john keynes had this article in the 1930's where he said technology is progressing at such a great rate that in 20 years we are going to be working 15 hour work weeks. that turned out to be completely false because what he didn't account for is the demand for goods with increase. who would have thought that
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beckon the 1930's anyone would need an iphone to rely automation reduced the needs of the workers on the particular devotee output increased so much that we had more of a need for the work. that said what technology enables with additive printing and robotics is the ability to continue to have a productivity advantage and efficiency advantage overpower other competitors and the challenge in my guesstimate is for the united states work force is how we going to prepare people to the able to use these machines to be able to operate the machines, to be able to be to come first and with computers and technology and that's why the investment in technology and the internet and in broadband and training people
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on that is absolutely critical to our future and the specific type of education it is not diminishing the skills that these jobs require. some of the law school classmates i was completely inept at making anything. it's ironic iran a book on manufacturing. i can't go assemble a cnc machine that doesn't mean that my skill was different. it's not any better, but somehow we have frowned upon or don't appreciate the complexity of the skills required in the trades and we need to educate on technology and have a respect for how difficult some of these jobs are.
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>> you mentioned the importance of sustaining the efforts of technology oriented education. which of the other current manufacturing facility sean initiatives de you think are critical for us to sustain, and what new initiatives would you suggest to continue to stimulate a more entrepreneurial success? >> it's a great question. the extension partnership is a small program it's not welna the department of commerce and what they do is help companies figure out how to become more efficient and help companies figured out how to economize on the production process or how to customize products how they can find the profitability and have a consultants do that.
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you can pay their rates but not if you are vitamix or a small or medium-sized manufacturers struggling to make ends meet and you want some help on how to compete. even hamilton talks about how the manufacturers need help in the coming conversions and we need technology so i think the manufacturing partnership which is mostly a underfunded, and has not been deployed should be supported and others have five times the help they provide their manufacturers. second i think exports. with only one per cent of our companies it is a staggering statistic and it's not just opening markets abroad. it is having a cultural familiarity and desire to go
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abroad and i think having the programs that can help manufacturers identify the markets and resources is critical you have to look for the tax policy. there is no doubt in my mind that china's policies are unfair not just to american workers but in my judgment unfair to their own middle class supporting the exporters in the regime at the expense of giving their own consumers access to the best products in the world and we need to make economic fairness the highest priority in our bilateral relationships with china and then on the tax policy we have to look at how do we incentivize manufacturers with the right tax credits to invest in the united states.
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>> i was wondering about export initiative which is that they should be doubled by 2004. >> i didn't plant this question. [laughter] >> i was wondering first went to the export. what can be done by the government or other institutions to promote the exports the goal can be reached? >> that is a great question. we export the planes and machinery's. the kind of export they get weapons and that isn't true.
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they are far lower than the machinery and complex equipment when comes to manufacturing. what are the challenges? deer about 32% of the last two or three years because of the president's leadership though he deserves credit it's also because we are coming out of the huge depression and the currency and the currency factors into it but what we can do concretely in my judgment, one is education. we need to pass people of the manufacturers, take exports seriously having an international division was a nice novelty that if they happen to fall in your lab that's great but the vast majority of the markets were in the united states. the world has changed.
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95% of consumers are overseas and we need companies to realize that and have international sales as a part of their strategy. the second is access to financing or the right tax incentives. one of the challenges in wichita they said their competition is getting financed through the brazilian government so when they were going to sell stuff it's like they gave them money and they had no access to financing here. it may be politically controversial and president clinton proposed taking some money and providing to manufactures but even if we are not directly loaning the nine defectors money what we can do is provide them the tax incentives if they are willing to export or manufacture and the final point i would say is there is sale wall and the world trade organization which allows the
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country's that have been direct taxation to accept their exporter from the taxation and if you have the income tax like we do we have developed to the trade organization that time we didn't think anyone was going to compete to build their industry we need to push for a change in the wto distinction between indirect and direct taxation when it comes to the tax credits for exporters. >> if you have come across companies that do export successfully during your research? >> absolutely. one of the company's i talk
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about is puckered in alabama and the expert can be all over the world and i described that as an example you don't have to be on the coast to be successful and one of the reviews they don't understand so they took exception with that but the point is it is extraordinary going on the trade fair's and trade missions they are aggressive seen where all the candy can be sold and they are a successful example of it but the chilean miners and they were made in pennsylvania and the drilling rigs to the world, but the reality is the consumers are
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netherworld blunt american goods because they tend to be the best, the most innovative and it is our job in the government to open the market because that's good for american business and people one of the world to have access to american technology and it's the job of the american business to see the opportunity and recognize there is a cache to make things made in america. >> i want to talk about the other side of the you mentioned, the idea of exporting ideas. my question is how would that be done? what do you propose to set up a way to spread the ideas around the world. >> it's a great question. i don't know how in the time of communism talking to one of my colleagues in his idea earlier there is the voice of radio and
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we had american values sort of try to transmit that to radio and a spells american ideals and we saw ourselves as a shining city on the hill in hopes that we could spread the ladies as. i think what the internet does, and the novel idea is provide the tools and the access to information where they can discover this on their own. fighting to make sure there isn't censorship of the internet and censoring the free flow of information i think this one way that we can encourage open discussion in the free discussion of ideas.
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so the american model spreading in the 21st century is because the tool of the internet that i think makes everyone able to speak, assemble, experts themselves which are some of the founding principles of this country. >> my question is complicated and simpler than the technology. america of course is an entrepreneur in developing things and new ideas which i don't think that we are lacking anything in that, but it becomes afterwards i don't understand once we have that developing the copycats in china and everything we can do that much faster and much easier and cheaper. so, our problem is that we -- how can we do that?
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steve jobs did the same thing he took the jobs out of china and that is a competition we have with china and how we can give them ideas in some kind of a taxation or something that is taken from us. that is the most difficult part of the entrepreneurship. >> i think your question is how can we keep mass production when the cost advantages are tremendous in places like china. >> labor costs are often about 10% of the product cost said there is a lot more that goes into it. it's also the subsidies that the chinese government is giving when they get free land and rent
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it is the currency issue but there are several signs. one of the r. huizenga slowly. transportation costs and fuel costs have increased and would be the natural gas in the united states of the manufacturing cost and the alternative manufacturing costs are coming down so the equation is a little more balanced. that said, in the case of apple they do their prototype manufacturing here so where the have to integrate can't design the production to make the iphone, they do that here to the offshore the mass production and that is the biggest challenge how to get the mass production back where the company's eye focused on are either smaller or medium-sized businesses so they are making the niche products or customized products you can't mass produce or offshore that or
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they are constantly staying at the innovation curve and one of the company's i deal with says they basically have an agreement with china saying they will give them the old technology to satisfy the joint agreement as long as they don't have to give the newest technology so they are giving them any but the most recent. the pressure on the united states will be to stay ahead of the innovation curve until we can get the trade policy in places like china. >> i think it is every american's responsibility that it should be to buy the goods here. we have to train the public for that. martin luther king statute was put there. can you believe that it was made
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in china? tedisco something so close to you. the public is responsible. how can you change that? >> there is a movement where you see people wanting to buy from local stores for environmental reasons supporting bill will businesses so there is a cultural aspect but i do think we also have to get the economics to work because while we need the pride we have to have the right economic incentives to sustain in the long term. is the mchugh just introduced the concept of the incentive. it seems to me there are the two forces that are opposing things you would like to achieve and one of them as over the last 40 years of the finance so they
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have replaced the manufacturing people. the finance people are affected, too push. for instance the most recent egregious example of that is the financial crisis was a response to the banks they were all too big to fail and the responses to solve the ranks. the biggest banks so the banks that were too big to fail are now bigger. how do you oppose this? they are the most powerful forces in the economy. >> that is an